UK's budget is the beginning of the end for renewables-based Net Zero

16th March 2023
Kiera Sowery

Net Zero Watch gave a cautious welcome to the Chancellor’s Spring budget, which in addition to extending energy bill support for households, contains several significant announcements relating to energy supply.

The facts:

  • £20 billion will be made available for Carbon Capture Utilisation and Storage (CCUS), allowing the continued use of low-cost and highly productive fossil fuels.
  • Confirmation of the previously announced body, Great British Nuclear (GBN), to foster the development of Small Modular Reactors (SMRs) 
  • Announcement of plans for a new framework for Control for Low Carbon Levies (CLCL), not updated since 2017. 

The sum allocated to carbon capture is substantial, and industrial interests such as Drax Power Station are already lobbying to receive some of this support to develop a proposal to capture the emissions arising from the burning of (mostly American) trees in its Yorkshire power station. However, it also opens the way for the construction of new coal-fired stations, and perhaps sophisticated gas-fired generators, without breaching the long-term Net Zero targets.

These fuels are of superior physical (thermodynamic) quality, and highly productive, meaning that the additional costs may be a reasonable price to pay for controllable generators that reinforce the UK’s security of supply, so badly eroded in recent decades by unreliable wind and solar generation.

However, and worryingly, it is not clear how this large subsidy will be raised, and it is to be hoped that it will not be levied regressively on consumer bills, as subsidies to renewables currently are.

Confirmation of support for the new body Great British Nuclear, similarly, should be given a cautious welcome. Nuclear energy, for both electricity and industrial heat, is in principle a very interesting option for the UK on economic grounds alone, with its low emitting profile being a desirable bonus. The Budget text emphasises that GBN’s remit will be to support smaller schemes, not large-scale projects such as Sizewell C. Whether this would include the medium-sized reactors proposed by Rolls Royce is unclear.

A new framework to control the consumer-cost impacts of low-carbon levies is badly needed. The Renewables Obligation (RO) currently costs consumers £7 billion per year and is predicted to rise over £8 billion by 2027, according to OBR estimates released today.

While no details of the new levy control system are provided in the Budget, the text contains the interesting observation that the new framework “will reflect our energy security priorities” (para 4.102). What this means in practice remains to be seen, but weather-dependent electricity generators, such as wind and solar, that make little or no contribution to energy security have much to fear.

Dr John Constable, Net Zero Watch’s director of energy, said: "What cannot go on must eventually start to stop. Today’s Budget is a very small but significant step in the gradual unwinding of the mistaken renewable energy agenda of the last 20 years. This is not an exciting budget, but it is probably a landmark."

Dr Benny Peiser, Net Zero Watch’s director said: "With China moving into the Middle East, President Biden approving massive oil drilling and Germany rejecting the EU’s planned ICE car ban, it is quite evident that we are witnessing a shift in the political climate. There is now a growing opportunity for Western leaders to instigate a gradual return to political and energy realism."

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